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The Guardian has an excellent summary of what you need to know about the Panama Papers, the data leak of the century from the Panama-based law firm Mossack Fonseca.The firms specializes, among other things, in incorporating companies in offshore jurisdictions that guarantee secrecy of ownership.

One of the measures PwC advised multinationals to take was to create a wholly-owned Luxembourg-based subsidiary which would hold the rights to intellectual property used by the rest of the group. The rest of the group would then pay licensing fees to the Luxembourg-based subsidiary which, by agreement with the authorities, would be granted tax relief of up to 80%……

A second tax avoidance mechanism simply involved the companies becoming incorporated in Luxembourg. In 2010, Luxembourg concluded an agreement with several companies of the Socfin (Société financière) agribusiness group, which was founded during the reign of Belgian King Leopold II by the late Belgian businessman Adrien Hallet. The companies chose Luxembourg as their base and made an agreement under which their dividends were subject to a modest 15% withholding tax, a lower figure than those in force where their farms are located (20% in Congo-K and Indonesia, 18% in Côte d’Ivoire).

The art of hiding profits

Altogether, Socfin subsidiaries in Africa[in Sierra Leone, Nigeria, Liberia, Cote d’Ivoire, and Cameroon]and Indonesia produced 123,660t. of rubber and 380,770t. of palm oil in 2012. The combined turnover of its main African subsidiaries reached €271 mn. in 2013. The list also includes the 100%-owned Plantations Socfinaf Ghana Ltd. (PSG) and Socfin-Brabanta (Congo-Kinshasa). Socfin also holds 88% of Agripalma in São Tomé e Príncipe and 5% of Red Lands Roses (Kenya).

A third mechanism involves cross-border lending within a group of companies. Companies registered in Luxembourg are exempt from tax on income from interest.

According to the Thabo Mbeki High Level Panel report between 1980 and 2009 between 1.2tr and 1.4tr left Africa in illicit flows. These figures are most likely an understatement. Multinationals, like the ones highlighted by Africa Confidential, accounted for 60% of these flows.

To the extent that this new lending is based on Africa’s strengthening economic fundamentals, the recent spate of sovereign-bond issues is a welcome sign. But here, as elsewhere, the record of private-sector credit assessments should leave one wary. So, are shortsighted financial markets, working with shortsighted governments, laying the groundwork for the world’s next debt crisis?

…….Evidence of either irrational exuberance or market expectations of a bailout is already mounting. How else can one explain Zambia’s ability to lock in a rate that was lower than the yield on a Spanish bond issue, even though Spain’s [which is not Uganda…] credit rating is four grades higher? Indeed, except for Namibia, all of these Sub-Saharan sovereign-bond issuers have “speculative” credit ratings, putting their issues in the “junk bond” category and signaling significant default risk.

The risks are real, especially when you consider the exposure to global commodity prices among the ten African countries that have floated bonds so far – Ghana, Gabon, the Democratic Republic of the Congo, Côte d’Ivoire, Senegal, Angola, Nigeria, Namibia, Zambia, and Tanzania.

In order to justify the exposure to the relatively higher risk and lending rates on the bond market (average debt period 11.2 years at 6.2% compared to 28.7 years at 1.6% for concessional loans) African governments must ensure prudent investment in sectors that will yield the biggest bang for the buck. And that also means having elaborate plans for specific projects with adequate consideration of the risks involved.

“They are fighting each other. By the time they have projects to finance, they will have earned quite a lot of interest from the Eurobond money they deposited. So, all the money is being used properly,” he [Finance Minister] said.

Indeed, last month FT had a story on growing fears over an Emerging (and Frontier) Markets bond bubble which had the following opening paragraph:

As far as financial follies go, tulip mania takes some beating. But future economic historians may look back at the time when investors financed a convention centre in Rwanda as the moment that the rush into emerging market bonds became frothy.

The piece also highlights the fact that the new rush to lend to African governments is not entirely driven by fundamentals – It is also a result of excess liquidity occasioned by ongoing quantitative easing in the wake of the Great Recession.

I remain optimistic about the incentive system that private borrowing will create for African governments (profit motive of creditors demands for sound macro management) and the potential for this to result in a nice virtuous cycle (if there is one thing I learned in Prof. Shiller’s class, it is the power of positive feedback in the markets).

But I also hope that when the big three “global” central banks start mopping up the cash they have been throwing around we won’t have a repeat of the 1980s, or worse, a cross between the 1980s (largely sovereign defaults) and the 1990s (largely private sector defaults) if the African private sector manages to get in on the action.

Speaking of arguing on the internet, I like the drama that is spats between economists and other academics on their respective blogs.

The Economist presents the faces of famine in the Horn. It is beyond sad that so many people should be condemned to suffer this man-made tragedy.

Brett Keller has posts here and here on Sam Childers (a.k.a. machine gun preacher), a gun-runner into the habit of doing morally and ethnically dubious things in the name of God. Keller says that Childers is “stockpiling arms at his orphanage and has admitted to selling weapons to unnamed armed factions in Sudan, Uganda, and Rwanda.”

In Zambia (where I shall be for the elections in Sept.) the politics of citizenship and belonging are yet to be settled 50 years after independence. We recently witnessed the dangers of de-legitimizing whole sections of countries as outsiders in Cote d’Ivoire. I hope that if Sata ever wins he will not do what incumbent Ivorians did to ignite a rebellion in the northern reaches of their country. For more on this check out this great book on the Ivorian collapse. I have read it and absolutely loved it.

A muddy few months ahead for the South African government. Infighting with the ANC top brass might mean an early exit for President Zuma. With over 60% of the votes in the last election, the ANC is essentially an oversize coalition prone to internal wrangles. It will be interesting to see how Zuma weathers the storm in the midst of challenges from both COSATU and Malema.

Lastly, the current issue of the Journal of African Economies looks at the impact of higher education in Africa. The main takeaway is that the low quality of education at lower levels (primary and secondary) has meant that the biggest bang for the buck on the Continent, as far as education is concerned, only comes with higher education. Too bad that many of those that get higher education are underpaid or out of the Continent all together.

Laurent Gbagbo, former president of Cote d’Ivoire who refuses to step down despite losing an election, faces imminent departure. According to the BBC and the Times, his own army chief (Phillippe Mangou) and other members of the security forces have already defected from his camp. The rebel forces loyal to Alassane Ouattara, the internationally recognized president of Cote d’Ivoire, are closing in on Abidjan, the commercial capital. The rebels are already in control of Yamoussoukro, the capital, and the important port of San Pedor. Mr. Gbagbo has been illegally exporting cocoa from the port in violation of a UN embargo. Gbagbo’s home town, Gagnoa, has also fallen to the rebels.

The only question left is what should happen to Mr. Gbagbo after he leaves the Ivorian presidency. His refusal to leave office after losing an election has already led to the death of hundreds of civilians. The most gruesome example of his lack of concern for his own countrymen is when he ordered his soldiers to fire mortars at a local market in Abidjan. Dozens, most of them women traders, were killed. An estimated one million people have fled their homes. In my view Mr. Gbabgo should stand trial for crimes against humanity, IN ABIDJAN, in order to serve as an example for other African autocrats that elections have consequences.

Mr. Gbagbo should not be part of any unity government.

In addition, an inquiry should be made into who exactly funded his months long attempt at supplanting Ivorian electoral democracy. The likes of Edwardo dos Santos of Angola and Robert Mugabe of Zimbabwe (who reportedly sent him weapons) should also face penalties – even if just adverse mentions – for their role in aiding and abetting a murderous autocrat.

For the last several months, the Ivory Coast has been crawling back to civil war. Now, both sides are actively bulking up their forces in what looks like an alarming calculation that this country’s crisis will get worse before it gets better. The Ivory Coast has been divided between a rebel-controlled north and a government-controlled south for the last decade. The fragile detante that restored peace in 2005 is shattering. Thousands upon thousands are fleeing the capital today in fear of exactly that.

In the southern city and capital of Abidjan, “thousands” of youth have joined the army, heeding a call from outgoing President Laurent Gbagbo, the man who lost November’s presidential election. The drive has been led by Gbagbo’s notoriously militant youth minister, Blé Goudé, who is under U.N. sanctions for violating the country’s peace agreement and impeding the U.N. peacekeeping missionin the country. He told Reuters, “Our country is under attack, so we’re organising ourselves to re-establish order … The legal way to do it is to put them in the regular army.”

Mr. Gbagbo lost an election late last year to challenger Alassane Ouattara but has refused to step down despite mounting international pressure. Most of the world, except Angola, Zimbabwe and a few autocratic presidents here and there, have condemned his refusal to step down.

Angola and Zimbabwe are arming Gbagbo. He is also busy recruiting militias within Abidjan and in neighboring Liberia. Mr. Ouattara, his challenger and Cote d’Ivoire’s legitimate president, has the backing of Forces Nouvelle, the rebel outfit that has controlled northern Cote d’Ivoire for most of the last 10 years. A blood bath between the two forces appears inevitable.

So what can be done? The AU’s mediation efforts have failed. The UN mission in Abidjan has been sloppy. ECOWAS, the regional bloc remains divided over the Ivorian issue. Confusion reigns. At the onset of the crisis most of those concerned wanted to avoid any conflict. But that calculus is already off the table. Now it is not whether there will be conflict, but how bad it will get. I say it is about time ECOWAS sent in troops (despite Ghanaian opposition) to take out Gbagbo before he becomes too entrenched in Abidjan.

This will be a lot less costly than waiting to send in a peacekeeping mission after hundreds of thousands have died.

Zimbabwe and Angola have been cited by UN investigators as violators of the standing arms embargo against the Ivorian despot Laurent Gbagbo. Mr. Gbagbo refused to leave office after losing to challenger Alassane Ouattara in elections last year.

Now it emerges that despite the ban on cocoa exports the Gbagbo faction in Abidjan continues in the trade. Africa confidential reports that:

Trade sources in Moscow and London report that business allies of Laurent Gbagbo have begun exporting cocoa out of the port of San Pedro in defiance of President-elect Alassane Dramane Ouattara’s export ban. Last month, the officially recognised President called for the ban, which he has extended to the end of March. He promised action against traders who violate the ban, which has the United Nations’ backing, and all the major buyers have complied. The European Union has forbidden any EU-flagged vessel from lifting cocoa. The export ban will carry on into April, we hear.

A key player in Gbagbo’s operation is Ali Lakiss, the Lebanese Managing Director of the Société Amer et Frères Cacao (SAF-Cacao), the biggest locally-owned cocoa company, who manages the exports, say European-based traders. We hear Lakiss is close to Simone Gbagbo, wife of the losing presidential candidate, who has major interests in the cocoa business. These efforts may help Gbagbo’s finances but his military position is steadily worsening

And in a somewhat positive twist, factions appear to have emerged within Gbagbo’s election-stealing coalition.

Rumours swirl around the military that the fighters who tried to storm Army Chief General Phillipe Mangou’s house on 14 March were dissidents from his own forces – rather than the pro-Ouattara ‘invisible commandos’ some had blamed. Some think dissatisfied generals could have encouraged the attack on Mangou: he criticised the army’s killing of six women in a demonstration in the Abobo suburb of Abidjan, two weeks ago. His remarks further damaged relations with the generals who are really in control.

This is good news. The international community must continue its stare-down of Gbagbo.

This should be a lesson to the kleptocratic, ideologically bankrupt and woefully inept autocrats all over the African continent that elections have consequences.

On the less sanguine side of things, and as pointed out by Africa Confidential, a military takeover by Gbagbo’s generals might be ominous for the prospects of democracy in Cote d’Ivoire. The generals might not necessarily be willing to hand over power to Ouattara.

With every day that passes the land of the late Felix Houphouet-Boigny seems to be inching closer and closer to an ineluctable civil war.

On March 10th, 2011 the African Union (AU) declared Alassane Ouattara as the legitimately elected president of Ivory Coast. Outgoing president Laurent Gbagbo (who insists he won the poll) responded by ordering his soldiers to kill supporters of Mr. Ouattara.

Now the ball is back in the AU’s court. So far the regional body appears to be at sixes and sevens, unsure of how to react. Lacking a regional hegemonic benefactor, the AU has over the years been mostly bark and no bite. Its leadership reflects the confusion and ineptitude that characterize the Continental body. One of its recent leaders is Muamar Gaddafi. Presently it is led by Teodoro Obiang Nguema Mbasogo, dictator of Equatorial Guinea and this idiot’s guy’s dad.

Mr. Gbagbo has refused to step down or be part of a unity government led by Mr. Ouattara, as demanded by the AU. Increasingly isolated, he has nationalized the cocoa industry in a desperate attempt to get some cash to pay his loyalists. Cote d’Ivoire produces 40% of the world’s cocoa. He is also reported to be receiving help from Robert Mugabe of Zimbabwe and Angola’s Jose Edwardo do Santos.

In an ideal world South Africa or Nigeria or even Ethiopia would have provided leadership and force whenever needed to ensure that AU resolutions are enforced. But Pretoria has a president in Zuma who shows no interest in foreign policy; his handling of the Zimbabwe crisis speaks volumes. Abuja is a mess, period and Ethiopia has first to eradicate famine before it can venture anywhere beyond Somalia.

Without an enforcement mechanism and a regional hegemonic benefactor, the AU’s resolutions will continue to be nothing but hot air.

The just concluded AU summit in Addis Ababa, Ethiopia had two key problems to address: the political crisis in Ivory Coast and the legal battles involving six Kenyans who face charges at the ICC. So far the continental body appears to have failed on its attempts to address both problems.

In the Ivory Coast, Mr. Gbagbo’s camp has already declared that the five person panel formed by the AU is dead on arrival unless Burkinabe president, Compraore is dropped. The Daily Nation reports:

The president of Burkina Faso, named on a high-level African Union panel tasked with settling Cote d’Ivoire’s leadership crisis, is “not welcome” in this country, a top ally of strongman Laurent Gbagbo said here yesterday.

And in Kenya, the political football involving the setting up of a credibly clean local judicial system to try perpetrators of the 2007-8 post election violence diminished the prospects of a deferral from the UN Security Council. Kenya must guarantee that it will try the suspects for the ICC to consider a deferral. It does not help that the appointment of high members of its judiciary, including the chief justice, the attorney general and the director of public prosecutions has already been soiled by political grandstanding.

Omar Bashir faces a tough few days ahead. More than 99% of Southern Sudanese voted for secession in the just concluded referendum, effectively guaranteeing the split of Africa’s biggest country in July of this year. Many in the North blame Bashir for losing the South. The waves of protests in the Middle East following the Jasmine Revolution in Tunisia is adding fuel to the flames. The Independent reports:

Violent clashes broke out at two Khartoum universities yesterday as heavily armed police surrounded stone throwing students. Social media groups similar to those used elsewhere in the Arab world to mobilise protesters have started to mushroom in northern cities.

One of them calling itself “Youth for Change” has attracted 15,000 members to its Facebook page. “The people of Sudan will not remain silent anymore,” it says. “It is about time we demand our rights and take what’s ours in a peaceful demonstration that will not involve any acts of sabotage.”

And in other news, the African Union summit opened on Sunday with the Ivory Coast top of the agenda. The Continental club of autocrats body agreed to set up a five member panel to continue negotiations with Laurent Gbagbo, the Ivorian president who lost an election but refuses to step down. Also on the AU’s agenda is Kenya’s misguided attempts at battling the ICC through threats of en masse pullouts from the Rome treaty by African countries.

The failure to force Gbagbo out of power and the ill-fated fights with the ICC are additions to the litany of failures that make most on the Continent question the relevance of the AU. In my opinion regional bodies are only as strong as their dominant members. With South Africa continuing to be disinterested in regional matters and Nigeria being Nigeria the AU is guaranteed to remain rudderless into the foreseeable future.

The Central Bank of West African States has signaled the beginning of the end of Laurent Gbagbo’s attempted auto-coup. The BBC reports that the regional reserve bank has denied access to Mr. Gbagbo and his cronies. It is only a matter of time before unpaid soldiers switch alliances and pledge their allegiance to the man that can deliver the paycheck, Mr. Ouattara. Or so I hope.

Mr. Gbagbo lost Cote d’Ivoire’s presidential election to opposition challenger Alassane Ouattara but refused to step down. The international community has thrown its weight behind Mr. Ouattara as the legitimate president. Both men have named their respective cabinets and remain holed up in the commercial capital Abidjan.

The UN’s secretary-general has warned there is a “real risk” of a return to civil war in Ivory Coast after the disputed presidential election.

Ban Ki-moon said the incumbent, Laurent Gbagbo, was illegally trying to expel the UN’s peacekeeping force after it recognised Alassane Ouattara as victor.

The UNSC should pass a resolution preemptively holding incumbent Laurent Gbagbo personally responsible for any deaths that occur because of his refusal to leave office. Already dozens have died in riots in the Ivorian commercial capital of Abidjan. Mr. Gbagbo lost to Mr. Alassane Ouattara by 8 points.

Since then the world’s biggest exporter of cocoa has been in a state of limbo, with both men swearing themselves in as president. The UN and the wider international community have recognized Mr. Ouattara as the duly elected president of Cote d’Ivoire.

On Wednesday a few Kenyan cabinet ministers, wealthy businessmen and security chiefs – mostly from central Kenya and the Rift Valley – will be exposed as suspects behing the post election violence in 2007-08 that killed 1333 Kenyans and displaced hundreds of thousands. Needless to say, this will have significant political consequences.

The expected political realignments following the initiation of this phase of the ICC process will shed some light on what Kenyans should expect come 2012. It will also be a litmus test on how much the Kenyan political elite is committed to reforms and fighting impunity. Kibaki and Odinga will either have to defend or cut loose some of their most trusted lieutenants.

In other news Laurent Gbagbo is still refusing to relinquish power in the Ivory Coast. Moreno Ocampo should warn him that if any more people die as a result of his refusal to obey the electoral outcome he will be held responsible.

The BBC reports that both Alassane Ouattara and Laurent Gbagbo have sworn themselves in as president. It is becoming ever more apparent that Cote d’Ivoire is on the edge of plunging back into civil war.

Laurent Gbagbo, through Cote d’Ivoire’s constitutional council, has declared himself winner of the Sunday presidential runoff. Ivory Coast’s independent electoral commission and UN and other observers continue to maintain that Alassane Ouattara, the opposition candidate, won the election with 54% of the vote.

The ethnic arithmetic of the election disfavored the incumbent Mr. Gbagbo (a Bete, 6%) after the third place candidate, former president Konan Bedie (a Baoule, 23%) endorsed Mr. Ouattara (a Dioula, 1.4% but who also commands most (up to 90%) of the northern Muslim vote).

Gbagbo should not be allowed to get away with this. Cote d’Ivoire’s election was not a close call. Ouattara won, fair and square. If any unity government is formed Mr. Gbagbo can only be a junior partner in it.

Needless to say this outcome may plunge the country back into civil war, mostly along the same ethnic and regional contours as in 2002-04.

The Ivorian electoral commission declared Alassane Ouattara, the northern candidate, as the winner of the presidential runoff held on Sunday. Ouattara got 54.1% of the vote. Incumbent Laurent Gbagbo disputed the results and had the country’s constitutional court reject the pronouncement. His supporters contend that there were significant irregularities in three regions in the north of the country.

Gbagbo (left) and Ouattara

UN and other mission observers declared that the election globally reflected the will of the people of Cote d’Ivoire. The BBC reports that the country’s military has sealed the borders amid rising tension and confusion over the political stalemate in the country. Mr. Gbagbo has been president since 2000.

For the sake of institutionalism the international community should not allow Mr. Gbagbo to remain in power. His 10-year tenure has not done much in terms of healing relations between the two halves of the country that fought the 2002-04 civil war. The fact that even his incumbency advantage could not help him beat Ouattara signals his general incompetence and the mass’s disaffection with his rule.

Cote d’Ivoire has a population of 21 million people, 49% of whom live in urban areas. Life expectancy in the country is a dismal 56 years. Only 48% of Ivorians age 15 and over are literate. Ivorians’ per capita income is US $1700 and 68% of them depend on agriculture for livelihood. 42% of Ivorians live below the international poverty line of $2 a day.

Cote d’Ivoire is the world’s largest producer and exporter of cocoa beans and a significant producer and exporter of coffee and palm oil. Because of the political risk in the country Cocoa for March delivery climbed $110, or 4 percent, to $2,868 in New York.

A deep magnitude-7.5 earthquake struck the Peru-Ecuador border region early on Friday morning, the U.S. Geological Survey said, causing tremors that the Ecuadorian president said were felt around the country.

A Russian court on Friday ruled that Paul Whelan, a former U.S. marine accused of spying, should be held in a pre-trial detention facility for a further three months to give investigators more time to look into his case.

Brazilian prosecutors are seeking the arrest of a Vale SA senior executive, authorities said on Friday, following the collapse of a dam holding mining byproducts that is believed to have killed over 300 people.